SA may get much worse
SOUTH Africa is on the downward fall of an arc of stability and there is no clarity on how deep the fall will be.
It is almost passé to keep repeating this, although never quite unnecessary.
Nevertheless, on the upward the country rose from the venality, cruelty and injustice of the 1980s to fiscal and financial consolidation and stability, as part of a relatively strong economy by the early 2000s.
At about the point when we were meant to reap the benefits of peak stability, in about 2009, the economy began its decline.
It is probably at that point when a type of criminocracy began to operate in a parallel or shadow economy that effectively held back the country’s formal economy.
I derived the idea of a criminocracy (a useful but not by any means a definitive concept) from experiences and observations of organised crime in southern Italy, mainly Campania and Sicily.
It has been clear for a few years now that the concept is useful, at least for understanding how criminality has hollowed out the state in South Africa.
A criminocracy emerges when groups of people – political formations or organised crime syndicates – take over the political economy of state and society, and create parallel economies that operate in the shadows.
When this happens, criminal networks, enterprises or groups of people control everything, from small businesses to large institutions of state, like revenue collection services or the police and intelligence community – and even cabinet portfolios. This takeover is made possible when unethical conduct is concealed behind cultural assimilation of criminal activities, and a rather flimsy veneer of legality, or even historical and political righteousness.
When a criminocracy takes shape the police and prosecuting authorities can no longer be trusted as they are themselves criminals or beholden to political power.
The state, provincial and local authorities simply make way for criminals to capture institutions of governance.
Local delivery of public goods and services becomes non-existent or the public have to pay bribes for municipal services.
The publication, this week, of The President’s Keepers, a book by investigative journalist Jacques Pauw, brings the criminocracy issue back to the fore. Not that it had ever receded.
Pauw writes about shady characters who operate in the shadows to keep the powerful in place, secure privileges, and access and ascension of people connected to the ruling elite.
Pauw’s work, extracts of which were published in the Sunday papers, provides us with an understanding of how a particular type of parallel or shadow economy has been created in South Africa around the ruling elite.
The point to note, here, is the role of the state-party nexus in South Africa.
Shadow economies exist everywhere.
There is the formal economy, that which comprises the millions of transactions between people every day.
And then there is a type of shadow economy comprising, at least in South Africa, the state-party nexus, where cash transfers are made, no taxes are paid, social charges, like labour costs, are snubbed, and regulations are completely avoided.
In developing countries shadow economic activities generally correspond to a large part of the formal economy.
In some cases they represent more than half of economic activities, according to one research project led by Cristina Terra, of the Essec Business School in France.
One indicator of the impact of shadow economic activities is the decline in income from revenue.
This decline in revenue was a key point in Finance Minister Malusi Gigaba’s mini-budget last week.
South Africa seems insufficiently protected from shadow economic activities.
In some ways, the state of South Africa’s economy is back to where it was in the late 1980s.
It is worth recalling what a former finance minister, Barend du Plessis, told his foreign affairs counterpart, Pik Botha, in 1985.
In Herman Giliomee’s The Last Afrikaner Leaders: A Supreme Test of Power, Botha recalls: “I will never forget the night of July 31 when [Minister of Finance] Barend du Plessis phoned me . . . [He said]: ‘Pik, I must tell you that the country is facing inevitable bankruptcy . . . The process has started.’”
South Africa is not bankrupt and the state has not collapsed. Not yet anyway. It is safe to say, nonetheless, that we are well on our way there: the process has started.
There was a period of necessary consolidation under a democratic government that held moral authority and placed the stability of public finance as a priority.
What happened between then, and today, may keep us occupied for years to come.
The only certainty that is emerging from the fug of chambers in Pretoria and the parliamentary complex in Cape Town is that things could get a lot worse before they get any better.
Let me not be the one to tell the women in Cofimvaba who work long hours every day to feed their families that things will get better.
They might ask “When?” – and for that there is no clear answer.
The downward slope of the arc of stability may be deeper than anyone could have anticipated only 10 years ago.
Dr Ismail Lagardien is the former executive dean of business and economics sciences at Nelson Mandela University.